Trivial in name only – do you know the rules on trivial benefits in kind?

George Hay Chartered Accountants

Although termed ‘trivial’ by the taxman, trivial benefits in kind can result in tax savings for you and your employees, which are often not so inconsequential.

The rules associated with trivial benefits in kind cover, for example, taking employees out for meals or giving gifts at Christmas – costs which can quickly mount up and might, over the course of the year, attract a hefty tax bill.

New rules, introduced a year ago, overhauled the procedures for taxing trivial benefits in kind. The reforms mean that any benefit that meets the following criteria, as set out by HM Revenue & Customs, is exempt from income tax and national insurance:

  • The cost of providing the benefit does not exceed £50 (or the average cost per employee if a benefit is provided to a group of employees and it is impracticable to work out the exact cost per person);
  • The benefit is not cash or a cash voucher;
  • The employee is not entitled to the benefit as part of any contractual obligation (including under salary sacrifice arrangements); and
  • The benefit is not provided in recognition of services performed by the employee as part of their employment duties (or in anticipation of such services).

The rules differ slightly for office holders of the company, family members and members of the household. In these cases, the exemption is capped at £300 in total for the tax year.

If you are satisfied that benefits provided to your employees meet the definition of a trivial benefit in kind, then you do not need to include them on a P11D and your employee will not be taxed on the value of the benefit.

During the life time of a business many different opportunities can arise for you to reduce your tax burden. We ensure that you receive the best advice, considering current legislation and thinking on this ever-changing area.

To find out more about how we can assist you, take a look at our taxation and other services.

Link: Tax exemption for trivial benefits in kind

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